Ray Anderson died this week. Most of us in the business just called him “Ray”, because he really was such an approachable guy. I saw him speak in San Diego three years ago, and even to a business green business veteran like me, he was sage-like. To most outside the world of sustainability in business, the name hardly rang a bell. But to those of us within its three concentric circles, Ray was an icon. As many know, Ray Anderson ran InterfaceFLOR. As the leader of a major global carpeting brand, which at that time relied on heavy use of industrial chemicals, hydrocarbon based products, energy and water use, InterFaceFLOR, like other carpet manufacturers was enduring a major challenge to rethink how its products were being made.

By the mid 1990’s when Ray had become the company’s CEO, more customers were asking questions about the company’s sustainability efforts. In 1994, Ray had an awakening of sorts (his so-called “point of a spear into my chest” moment), when after having a number of meetings and discussions with his staff and reading Paul Hawkens the Ecology of Commerce, he became an enlightened, radical industrialist. He had come to the conclusion that the environment was at risk and a lot of that was caused by industry and companies such InterfaceFLOR that were based on petrochemicals and energy.

I, myself, was amazed to learn just how much stuff the earth has to produce through our extraction process to produce a dollar of revenue for our company. When I learned, I was flabbergasted. We are leaving a terrible legacy of poison and diminishment of the environment for our grandchildren’s grandchildren, generations not yet born. Some people have called that intergeneration tyranny, a form of taxation without representation, levied by us on generations yet to be. It’s the wrong thing to do.-Ray Anderson

The Radical Industrialist Takes on the Supply Chain

Ray was simply on a mission- for InterfaceFLOR to not only cut waste, but to be a leading, responsible business. He became the face of the “radical industrialist” (the title of his last autobiographical book which I received signed by him just two months ago is called Confessions of a Radical Industrialist) and in 1994 launched InterfaceFLOR into a first mover role to reduce its environmental and social footprint. The data is quite extraordinary in the 17 years since the company launched its many environmental initiatives. Of course, Ray started with a plan- one that by necessity started small- but was across the board, an overhaul affecting every link of the supply chain. Ray also smartly knew that go get his shareholders on board, he needed “obliterate costs/footprint associated with waste; silencing the shareholders that were uncomfortable with the risk involved with completely revolutionizing your company”.

We began to tackle the face of mountain we identified as waste. We defined waste, by the way, as any cost that we incurred that does not add value to our customer and that translates to doing everything right the first time, every time. It’s not just waste material, scrapped and low quality and so forth. If you send something to the wrong destination and have to get it back and reship it — that’s waste. If you incur a bad debt — that’s waste. So we defined waste very broadly and over time we actually said that any energy that comes from fossil fuel by our definition is waste and we need to eliminate it. We really began to think in different ways about our business in terms of climbing this mountain and it became very clear very quickly this was the smart thing to do. Not only did we start to generate answers for those customers, they embraced us for what we were trying to do. The goodwill in the market place has just been stunning. The rest of the business case is pretty simple. I cost it down not up. – Ray Anderson

According to Lindsay Parnell, InterFaceFLOR’s CEO for Europe, the Middle East, Africa, and Asia, the company has “reduced waste to landfill by 80 per cent since 1996, curbed water use by the same amount, reduced energy use per unit of production by 43 per cent, and cut greenhouse gases 44 per cent, partly by generating 30 per cent of its energy from renewable. But what also stands out (and what made Ray such a business visionary) was that there was a phenomenal financial payback that could be realized from “going green”. According to Parnell, “We could see that the millions of dollars were stacking up. Between 1995 and 2010 we have saved $433m – that is a huge amount for a company with revenues of around $1bn. There is no way we have invested $433m in this, but that is what it has saved.”

It’s not just the right thing to do, it’s the smart thing to do. – Ray Anderson

Climbing Mount Sustainability

Rays efforts were noticed for sure. Time Magazine featured him in an article this past spring and Fortune Magazine called him “America’s greenest CEO”. He went out and “evangelized” over 150 times a year, until his fight with cancer started to finally slow him down. The awards and honors bestowed on Ray and the companies over the past two decades are too many to mention here. Recently, Interface ranked 11th worldwide in the 2010 Sustainability & Innovation Global Executive Study & Research Project by MIT Sloan Management Review and The Boston Consulting Group. They ranked second behind Unilever in the 2011 Global Sustainability Leaders Survey from GlobeScan Inc. and SustainAbility Ltd. Suffice it to say though that InterfaceFLORs efforts disruptively changed the way the carpet, building materials and textile industry operate today as compared to 20 years ago.

Meanwhile, in the last couple of years the company launched its highly ambitious Mission Zero ™ sustainability strategy, which aims to turn InterfaceFLOR into a zero-impact organization. Ray often spoke about how climbing the sustainability mountain in business was akin to climbing Mount Everest and that there were seven paths or fronts to get there:

Eliminate Waste: Eliminating all forms of waste in every area of business;

Redesign Commerce: Creating a new business model that demonstrates and supports the value of sustainability-based commerce;

Making the Business Case

When you are being asked to make the business case for sustainability – perhaps ask them to make the business case for being un-sustainable. – Ray Anderson

You see, for the past 30 years I’ve been evangelizing like Ray for organizations to make “the business case” on behalf of reducing waste of any kind (be it over-consumption, generation of waste, human productivity waste, etc) so the bottom line is optimized and employees, communities and the environment are protected. To me it’s a “no brainer” and for folks like Ray it took an epiphany to make that realization. Since Ray’s awakening in 1994, and especially in the past half decade or so, more CEO’s and manufacturers with local to global reach are coming to their own realizations and drawing their own conclusions.

Ray stepped out of his comfort zone to challenge the status quo. He forged a new business normal that called for a respect of the land, responsible use of resources, smart design and innovative end of life (cradle to cradle) management of products. Mission Zero will continue for the many thousands of employees of InterFaceFLOR around the world- all because of one man’s vision. All because of Ray.

As Ray said back in 2008 when I saw him, “There are noble fortunes to be made in the transition to sustainability.” That inspirational quote stands right up there with my son’s from back in 1991 when he introduced me to his pre-school class as the Dad who “saves the planet”. Sometimes, being radical is not such a bad thing.

Mr. Anderson…er, Ray, thanks for all the inspiration- this one’s for you.

In Part 1 of this series on sustainable procurement, I laid out my vision of the heart of a sustainable, green supply chain that runs through its procurement function. It’s simple to show how every product has a hidden human health, environmental and social impact along the entire supply chain. However, it’s been challenging to bring sustainable procurement into a central decision making role in line with organizational business goals. The results to date have been a mixed bag, as I alluded to when I mentioned Aribas new Vision 2020 report and companion dialoguing process, now underway.

Sustainable Procurement: back to management!

On the heels of the Ariba effort comes a promising benchmark report recently released by HEC-Paris and Ecovadis. Entitled “Sustainable Procurement: back to management!” this study(available for download on Ecovadis’ site)has risen to rescue and tempered my fears of devolving sustainable procurement. In fact, the report may suggest a positive “tipping point” in favor of sustainable procurement. The efforts behind the 2011 edition of the HEC/EcoVadis Sustainable Procurement Benchmark were carried out between the fall of 2010 and early 2011. This benchmarking process started in 2003 and the 5th conducted since that time.

The objective of the benchmark is to provide a snapshot on what’s trending in the area of Sustainable Procurement practices. According to the authors, the following overarching questions were explored:

How has the vision of the Chief Procurement Officers (CPOs) evolved?

What tools and initiatives seem to be the most effective over time to drive changes?

How is Sustainable Procurement progress measured?

What are the remaining challenges faced by most Procurement organizations?

The study identified three main drivers behind Sustainable Procurement initiatives: Risk Management, Value Creation, and Cost Reduction. These findings mirror some of the trending areas and critical issues identified in the Ariba report. HEC and Ecovadis suggested that these three drivers’ shows that many organizations are now facing new expectations in terms of Corporate Social Responsibility and Sustainability from the Procurement Departments of their clients and, suggest that having a sustainable procurement program in place can become a competitive advantage.

Sustainable Procurement Remains High on Executives Agenda

92% of the surveyed Companies consider Sustainable Procurement a “critical” or “important” initiative, even though for the 1st time this year, “Risk Management” took over as a priority initiative.

The major progress made in 2011 is on the support from the Top Management (+24%) thus demonstrating that Sustainable Procurement is attracting more and more interest from Executive Committees, and significant progress was made in implementation of tools and organizational changes.

Significant organizational changes have been implemented: 45% of companies already have “dedicated teams” and 57% report having trained a majority of procurement staff on Sustainability.

Whereas in 2007 only 1/3 of companies were using formalized methodologies for assessing their suppliers’ sustainability performance, in 2011 two-thirds of them are now implementing dedicated tools (either internal or leveraging 3rd parties).

Finally 92% companies have increased (56%) or maintained (36%) their budgets related to Sustainable Procurement, which should yield more changes in the future years.

Tools for Sustainable Procurement on the Rise

The HEC/Ecovadis study found that basic tools such as “Suppliers Code of Conduct” , “CSR contract clauses” and “Suppliers self-assessment“ were now the rule rather than the exception among companies surveyed by a ratio of 2 to 1, but interestingly were still found to limited value in terms of risk management. What I found encouraging was that the study found maturation in the types of tools used, including “Supplier Audits” and “Supplier CSR information databases“. This type of work has clearly been evident in what I have reported in the past, especially among multi-national companies with contractor manufacturing operations in developing economies (like China, India and Brazil). These advanced tools offered more opportunities for suppliers to engage directly with buyers, allow for data verification, and offer direct recommendations for supplier CSR and sustainability improvement. Over half of the companies surveyed had advanced to this next level. Finally, when asked what the most effective uses of resources were in developing a Sustainable Procurement Program, respondents mentioned 1) top level support, 2) creation of cross functional teams and 3) training, as key success ingredients. All three of these success factors had shown substantial improvement over the past several benchmark cycles, according to the study.

Sustainable Procurement Creates Value

This is not the first study that has come along that demonstrates value and return on investment from sustainable procurement. I wrote earlier of a joint study by Ecovadis, INSEAD and PriceWaterhouseCoopers that demonstrated similar results. In that study, payback from most green procurement activities was huge. Companies surveyed were able to benefit quickly from risk management reduction and potential revenue growth opportunities, due in part to sustainable procurement. The study also found that there were additional ‘value creation’ opportunities that could be realized if procurement departments collaborated more closely with the marketing and R&D departments upstream on the projects.

Also, a study in 2009 by a company named BrainNet (Green and Sustainable Procurement: Drivers and Approaches”) looked at sustainable procurement and value creation and found that “… procurement with an ecological and social conscience is not a cost factor, but a value factor…Companies that pursue a consistent approach to green and sustainable procurement receive an above-average return on capital deployed.” The study produced what they describe as an “evolution curve for sustainable procurement” that describes the maturity of various approaches of sustainable procurement. This curve compares well with the most recent EcoVadis/HEC findings and suggests that there may be a widening gap between leaders and laggards.

Sustainable ‘green’ procurement embraces a holistic approach, one that encompasses organization, people, process, and technology to create greater product value along the entire supply chain. This type of value creation can managed by establishing firm triple bottom line based metrics from upstream suppliers to downstream users and using the procurement function to support product and process innovation and accounting for total cost of ownership (TCO).

What’s Next?

According to the most recent HEC/EcoVadis benchmark report, it is clear that new green and social business models depend upon innovation, and a gap still among many organizations to implement a truly Sustainable Procurement vision. This was clearly in evidence by the lack of mentions by Chief Procurement Officers that I discussed last week in the Ariba study.

The HEC/Ecovadis report suggests that when implementing Sustainable Procurement practices, a three phase process can get the ball rolling, starting first by orienting and energizing the procurement function through:

“1. Communication activities: Building awareness among employees regarding the approaching change, the benefits and the steps to be implemented.

2. Training and Performance support: ensuring that the initiative is being understood among those who are to execute the change or be part of it, and leading to buy-in of the key stakeholders.

3. Rewards and recognition: ensuring that employees – and suppliers – who embrace change are properly recognized and rewarded. This final step is when implementation is not only measured, but also celebrated.”

I’m going to say it again…and again. All sustainable business roads lead through the procurement function. The procurement function is the perfect nexus and a critical organizational player that touches product designers, engineers, multiple tiers of suppliers and subcontractors, manufacturing operations, logistical warehousing and distribution and the end users. Yes indeed, things are looking up for sustainable procurement…it’s ‘game on’.

To paraphrase a timeless Bob Dylan song, “The Times They Are A’ Changin’” is no understatement. You can read the details from across the globe in the news every day and are rapidly happening simultaneously on political, economic and social levels. And business is also making radical changes in the sustainability and corporate social responsibility (CSR) frontier.

“Then you better start swimmin’Or you’ll sink like a stoneFor the times they are a-changin’.”- Dylan

One area that appears to be in movement is Procurement. You know, those folks on the third floor in the back that order stuff? Well, wrong! I’ve maintained that the heart of a sustainable supply chain runs through its procurement function. That’s because every product- every single purchase- has a hidden human health, environmental and social impact along the entire supply chain. My previous posts have discussed how the procurement function is a vital cog in product value chain. Purchasing staff are the “gatekeepers” that can access powerful tools and serve as a bridge between supplier and customer to assure that sustainability and CSR issues are taken into account during purchasing decisions. 2010 was a watershed year for sustainability initiatives and supply chain management and I predicted that 2011 would see greater progress.

So I was incredibly excited when I recently got my hands on a relatively new white paper from Ariba, entitled “VISION 2020 -Ideas for Procurement in 2020 by Industry-Leading Procurement Executives”. According to the conveners of the document, the “objective [of the effort initiated in 2010] is to initiate a dialogue on the future of procurement and to create a roadmap for how to get there.” For that, they connected with leading practitioners and executives from around the world and across a variety of sectors to share their ideas, best practices and to read the tea leaves as to where procurement might be in 10 years.

And while the initial report laid out some pretty intriguing and widely varying trends and predictions about the state of procurement in the corporate function, I was unfulfilled. I was all ready to read about how the emergence of sustainability in the marketplace was going to drive procurement decisions. I expected to hear how top flight companies around the world were collaborating with their supply chain, implementing staff training on ‘green purchasing’ practices, and implementing sustainability driven supplier audits and ratings scorecards.

Boy, was I wrong! Only ONE mention of the word “sustainability” (thank you Dr. Heinz Schaeffer, Chief Procurement Officer, Northern and Central Eastern Europe for AXA), and no mentions of “responsible sourcing”, “green supply chain” or “sustainable sourcing”. I would have expected more from chief procurement representatives from the likes of KeyBank, Maersk, Sodexho, and former execs from Hewlett- Packard, General Motors, and DuPont. Most of these companies are generally considered leaders in the sustainability space. So why would there be a disconnect between what companies are doing in design, manufacturing and product life cycle management and the procurement function?

Before we go too far, its helpful to define what “sustainable procurement” is. While there is no singular definition for it, I like the definition offered up by the UK-based Chartered Institute of Purchasing & Supply (CIPS). CIPS definition is “a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, whilst minimising damage to the environment.”. And what CIPS defines as ‘whole life basis’ is that “sustainable procurement should consider the environmental, social and economic consequences of design; non-renewable material use; manufacture and production methods; logistics; service delivery; use; operation; maintenance; reuse; recycling options; disposal; and suppliers capabilities to address these consequences throughout the supply chain” [emphasis added].

It’s a good thing that the authors from Ariba stated that “The [2020 Vision]report is intended not as an end, but rather as a point of departure for much discussion and debate around where procurement can and should be setting its sights for the year 2020 and beyond. In fact, Ariba invites readers to “join the debate and to extend the discussion with new ideas by joining the conversation. I have and I hope you will too. But I think I’ll start right here first.

Key Findings of Interest:

The report identified six key trending areas and take-aways among the participants who have weighed in so far, namely:

Procurement devolves- with spend management requirements shrinking, companies are being forced to optimize what resources they have and make better informed decisions. More work at the business line level will occur, possible eliminating the central procurement function entirely. Money and metrics will drive most decisions as companies face leaner profit margins. There will be a need to engage end customers more and more and leverage relationships.

The new supply management emerges– some traditional sourcing functions may become outsourced. Strategy “will tie directly to an enterprise’s end customers and it will be more cognizant of the diversity of desires and requirements within the customer base”.

Skill sets change. The Chief Procurement Officer and staff must have broader skills that allow them to not only create opportunities for revenue enhancement internally and optimized “spend”, but also be more in touch with end customer values-driven needs. Procurement staff need to be tuned into multiple tiers of the supply chain, dive deep “inside the supply chain and bring [issues] forward to the designers within [individual] companies”.

Instantaneous intelligence arrives. Market pricing will become more transparent [the Cloud forces transparency to some degree]. Companies will have to rapidly extract innovation and other value from supplier bases, and build exclusive commercial relationships with leading suppliers that share both risks and rewards.

Collaboration reigns- There will be as the report notes a “big emphasis on driving and taking innovation from the supply base… the supply role will be less ‘person-who-brings-innovation-in’ and more ‘person-who-assembles-innovation-communities-and-gets-out-of-the-way’. Suppliers are being asked more often to participate in early design and product development as a way to leverage risk and control overall product life cycle management risks.

Risk management capacity and demands soar– as companies are already realizing, effective procurement relies on response to risk management variables (financial, ethical, and operational performance). Companies must create “360-degree performance ratings and provide greater transparency into market dynamics, potential supply disruptions, and supplier capabilities”. A few participants noted that there will be a “big expansion in the kinds of risks companies address in their supply chains, considering, for example, such things as suppliers’ sustainability, social responsibility…”.

Now if I read in between the lines, I can easily pluck out a number of key procurement trends from the 2020 report that transfer well to sustainability and responsible sourcing. Risk Management. Collaboration. Design phase (life cycle) engagement of multi-tiered suppliers. Key performance metrics. Responding to consumer demands. Supplier performance ratings.

Courtesy babycreative via Flickr CC

One takeaway for me appears that there may be a disconnect still between the procurement function and other functions within organizations. So is the procurement function still operating in obscurity in most organizations? It all depends who you talk to but also on your skill at reading the tea leaves.

Rest assured that compared to only a few years ago, more companies that are seeking to manage the life cycle environmental impact of their productsfrom design and acquisition of materials through the entire production, distribution and end of life management. They’re finding sustainable procurement to be a valuable tool to quantify and compare a product or component’s lifetime environmental and social impact early on in a products value chain while positioning the company for smart growth in a rebounding economy. We may be at a sustainable procurement “tipping point” and Part 2 will present the results of a very promising benchmark report recently released by HEC-Paris and Ecovadis, which tells a much different story.

I was reminded of that Don Henley (The Eagles) solo hit from back in the 1980’s when I read about Greenpeaces latest initiative and report…aptly titled…you guessed it, “Dirty Laundry”. The report focuses on the high levels of industrial pollutants being released into China’s major rivers like the Yangtze and the Pearl and commercial ties between a number of international brands such as Adidas, Nike and Li-Ning with two Chinese manufacturers responsible for releases of those hazardous chemicals.Greenpeace has also launched the challenge ‘Detox’ Campaign, calling “brands, especially Adidas and Nike, to take the initiative and use their influence on its supply chain.” The organization unfurled its characteristic banners at Adidas’s main retail store in Beijing this week.

There are several nuances to this story that are important to pass on and collaborative opportunities (rather than the finger-pointing that has plastered Twitter and other media the past 24 hours) to explore.

Supply Chain Challenges …Again!

This latest supply chain environmental wrinkle underscores the challenges multi-national organizations (MNC) are facing daily in oversight and enforcement of first tier, second tier or lower contract manufacturers. If it’s not Apple under the radar, its Nike, or Adidas, or GE…who’s next? Recent events concerning Apple Computers alleged lax supplier oversight and reported supplier human rights and environmental violations only shows a microcosm of the depth of the challenges that suppliers face in managing or influencing these issues on the ground.

To be fair, although the pollution is real and the threat of toxics contamination very real, it’s possible that Greenpeace may be sensationalizing Nikes and Adidas’s culpability. In fact, neither company directly is involved with the key manufacturers labeled in the Greenpeace report. The two manufacturers are the Youngor Textile Complex in Ningbo, an area near Shanghai along the Yangtze River Delta, and Well Dyeing Factory Ltd. in Zhongshan, China, along the Pearl River. The Younger Group is China’s biggest integrated textile firm.

“Game on, Nike and Adidas. Greenpeace is calling you out to see which one of you isstronger on the flats, quicker on the breaks, turns faster and plays harder at a game we’re calling ‘Detox’,” “Whether you’re ‘All in’ with Adidas or believe in the Nike motto to ‘Just do it,’ you can challenge the brand you wear to win the race to a clean finish.” -Greenpeace DeTox campaign’s website.

(from Greenpeace Report, "Dirty Laundry")

Both Nike and Adidas admitted jointly that said their work at Youngor is limited to cut-and-sew production — not “wet processing” such as dyeing and fabric finishing that Greenpeace says is the cause of the chemical discharge. Greenpeace did not hide behind that fact but made the point (perhaps rightly so) that “As brand owners, they are in the best position to influence the environmental impacts of production and to work together with their suppliers to eliminate the releases of all hazardous chemicals from the production process and their products”. I agree on the grounds that effective supply chain sustainability practices and corporate governance must be driven by the originating manufacturers that rely on deep tiers of suppliers and vendors for their products.

That being said, I think that to call out Nike and Adidas specifically (along with other companies like Puma) is to suggest that they are not doing the right thing as regards sustainability in the apparel industry. For instance, Nike has learned from its mistakes if the past (especially on the labor/human rights side of social responsibility) and implemented aggressive governance frameworks and on the ground oversight programs. Also, the Nike Considered Index evaluates solvents, waste, materials, garment treatments and innovation, and the company has an internal working group constantly evaluating Restricted Materials lists.

Kick ’em when they’re up

Kick ’em when they’re down

Kick ’em when they’re up

Kick ’em all around- (Don Henley)

Chinese Laws and Regulatory Oversight- Not in Sync

As I noted recently, China is still in the “ramp-up” phases of economic development. Plus it’s been evident for some years that enforcement of environmental laws and regulations by government agencies has not been on par with the intent of the laws. According to the report, samples taken from the facilities contained heavy metals and alkylphenols and perfluorinated chemicals, which are restricted in the United States and across the European Union. These chemicals have reproductive and hormone disruptive effects Therein lies another institutional problem…the laws in the home countries of the MNC’s are not in sync with those in the host manufacturing country- in this case, China.

Writing yesterday in China Hearsay, Beijing based lawyer Stan Abrams offered this up. “This is a classic law versus CSR problem. The law here in China allows for this activity, yet the allegation is that this is a harmful activity. Should the companies in question merely follow the law or “do the right thing” and either sever ties with the polluter or pressure it to change its behavior?”

It’s likely that (for the foreseeable future) Chinese political and economic systems will remain focused on rapid development at all costs. So it’s critical that local/in-country government policies be aligned as well to support capacity-building for companies to self-evaluate, learn effective auditing and root- cause evaluation, institute effective corrective and preventive action programs and proactively implement systems based environmental management systems.

Multi-Sector Collaboration is the Answer

The apparel industry as a whole has taken a very proactive stance in looking at ways to redesign sustainably, produce its goods taking a cradle-to cradle perspective, and manage toxic chemical use and waste streams so that human and environmental exposures are minimized. The multi-stakeholder Sustainable Apparel Coalition ironically includes Nike, the Gap Inc, H&M, Levi Strauss, Marks & Spencer, and Patagonia (some of whom are also being targeted by Greenpeace). Over 30 companies have committed to collaborating in an open source way to drive the apparel industry in developing improved sustainability strategies and tools to measure and evaluate sustainability performance. In addition over 200 outdoor products companies from around the world have been working together on sustainability best practices and standards, called the Eco-Index, led by the Outdoor Industry Association and European Outdoor Group.

The most successful greening efforts in supply chains in “tiger economies” are based on value creation, sharing of intelligence and technological know-how, and support in developing environmental regulatory frameworks that have the force of law. MNC’s and contract manufacturers can collaboratively strengthen each other’s performance, share cost of ownership and social license to operate and create “reciprocal value”. Greenpeace wants MNC’s to establish “ clear company and supplier policies that commit their entire supply chain to the shift from hazardous to safer chemicals, accompanied by a plan of action that is matched with clear and realistic timelimes”. Agreed with that sentiment, but many hurdles remain to cross.

Youngor Textiles, Adidas and others cited in the report have not hidden from the findings, and Youngor has committed to working jointly with Greenpeace to find a workable solution to remove potentially harmful toxics from the apparel manufacturing supply chain. Solving this problem on the ground will take a multi-stakeholder effort to 1) balance contractual arrangements among many parties, 2) craft good law and enforceable regulations, 3) drive clean chemistry, 4) redesign production processes and use advanced manufacturing technology, and, 5) develop, implement and maintain robust contactor monitoring.

I will be watching carefully to see how this collaborative effort with an NGO giant and big business unfolds…er, should I say “unfurls”.

The pea pod is possibly the greatest sustainable packaging design nature can provide. It packs a lot in a small space, efficiently uses the minimum amount of resources…and best of all its compostable…well sort of unless I eat it!

And like the simple pea pod, few sustainability attributes in a supply chain come together across the value chain than packaging. Packaging and repackaging is ubiquitous along every step of the chain, from product design, prototyping, procurement production, distribution, consumer end use and post consumer end-of-life management. And the more parts that are in use in making of a product, and steps along the way to deliver the parts, the greater the packaging (and hence environmental footprint) involved along that chain. And for every packaged part that comes from someplace else to make a product, a similar carbon, energy and resource use can be measured.

That’s why sustainable practices in packaging are so important in driving supply chain efficiency…and why innovation in the ‘green’ packaging sector has been “white hot” the past several years. A study by Accenture found that retailers can realize a 3 percent to 5 percent supply chain cost savings via green packaging initiatives. So if you extrapolate that type of savings out across multiple tiers of supply chain activity, where packaging is the common denominator, the efficiencies and savings can rack up quickly.

A new report from research organization Visiongain finds that because of a variety of drivers such as carbon emissions, extended producer responsibility and waste reduction targets plus advanced packaging technologies, the sustainable and green packaging market’s worth is expected to reach $107.7 billion in 2011. Their report shows varying degrees of growth from developed to developing nations; however what’s striking is that the growth trend is weathering the slumping global economy and higher production costs.

Sustainable Packaging 101

Sustainable packaging solutions deliver around two colors according to the Accenture report: black (deliver reduced costs) and green (reduce environmental impacts). Sustainable packaging relies on best engineering, energy management, materials science and life cycle thinking to minimize the environmental impact of a product through its lifecycle. Given the past decade or so of science and engineering work around sustainable packaging, there are some discovered and tested attributes, such as:

Reducing packaging and maximizing the use of renewable or reusable materials

Using lighter weight, less toxic or other materials which reduce negative end-of-life impacts

Demonstrating compliance with regulations regarding hazardous chemicals and packaging and waste legislation ( such as the European Directive 94/62/EC on Packaging and Packaging Waste)

Associations are stepping up to the plate as well as manufacturers in a variety of consumer product markets. In March of this year, the Grocery Manufacturers Association (GMA) announced the results of survey research by McKinsey that indicated elimination of more than 1.5 billion pounds (800 million pounds of plastic and more than 500 million pounds of paper) since 2005, and another 2.5 billion pounds are expected to be avoided by 2020. Over 180 packaging initiatives were identified and evaluated. The GMA estimated that the reduction would be equal to a 19 percent reduction of reporting companies’ total average U.S. packaging weight.

In the fast moving consumer goods category Coca Cola’s packaging efficiency efforts just in 2009 avoided the use of approximately 85,000 metric tons of primary packaging, resulting in an estimated cost savings of more than $100 million. The company rolled out of short-height bottle closures, reducing material use, implemented traditional packaging material light weighting; and used more recycled materials in packaging production. At the end consumer point, the company has also supported the direct recovery of 36% of the bottles and cans placed into the market by the Coca-Cola system and continues to work with distributors on increasing recovery efforts.

In the electronics space, Dell Computer committed in 2008 to reduce cost by $8 million and quantity by 20 million pounds of packaging by 2012 centered around three themes (cube, content, curb):

Shrinking packaging volume by 10 percent (cube)

Increasing to 40 percent, the amount of recycled content in packaging (content)

Increasing to 75 percent, the amount of material in packaging to be curbside recyclable (curb).

As an example, Dell wanted to find a greener, more cost efficient way to package its computers by eliminating foams, corrugated and molded paper pulp. The solution was sustainably sourced bamboo packaging certified by the Forest Stewardship Council. So far, Dells efforts have resulted in eliminating over 8.7 million pounds of packaging, and they have nearly met their recycled content goal.

Perhaps most significantly, WalMart took a huge step in 2007 to seek supplier conformance around packaging. Since then, despite the initial uproar, there has been an uptick in design and innovative product activity by thousands of key suppliers in response to the mega-retailers challenge. By reducing packaging in the Wal-Mart supply chain by just five (5) percent by 2013, that would 1) prevent 660,000 tons of carbon dioxide from entering the atmosphere, keeping 200,000 trucks off the road every year (that’s a green attribute) and save the company more than $3.4 billion (a black attribute). Walmarts bottom line was to put more products on its shelves in the same space, and also recognized the sustainability attributes that change would make. They also knew that most consumers (me included) just despise excess packaging. Here are two examples of Walmart supplier efforts from a small and large supplier:

Alpha Packaging: the company has anew bottle design for Gumout Fuel Injection Cleaner. The company concentrated the product and switched from PVC bottles (which are not recyclable) to much smaller bottles made from PET (which is recyclable and has 30% post-consumer recycled content). This led to 1) reduced product weight by up to 51% and 2) capability to transport a truck filled with new 6 oz products (formerly 12 oz) equating to 153,600 bottles as opposed to 61,000 originally.

General Mills: the company took a novel approach and they looked at the product first. They straightened its Hamburger Helper noodles, meaning the product could lie flatter in the box. This, in turn, allowed General Mills to reduce the size of those boxes. According to the company, that effort saved nearly 900,000 pounds of paper fiber annually. The company effort also managed to reduce greenhouse gas emissions by 11 percent, took 500 trucks off the road and increased the amount of product Wal-Mart shelves by 20 percent.

Win-Win-Win. For the environment, for manufacturers and suppliers, and for consumers.

Full Circle Collaboration is Vital to Drive Sustainable Packaging

What makes sustainable packaging compelling is that it’s one of the key elements of a product that consumers can see, touch and feel. Over packaging or improper packaging can produce high reaction levels, right? (remember last year’s noisy Sun Chips compostable bag dust up?) But in an interesting post last year in Packaging Digest by Katherine O’Dea of the Sustainable Packaging Coalition, she mentioned the critical importance of collaboration between brand owners and retailers. What was a scary statistic is that “brand owners and retailers may have direct control over as little as 5 percent of the environmental impacts of packaging and only indirect control over the other 95 percent.” On the other hand another study conducted by the market research firm Datamonitor showed of U.S. consumers surveyed, 49% felt that packaging design has a medium or high level of influence over their choice of food and drink products.

Just as there are challenges to drive consumer acceptance of more sustainable types of package designs (especially aesthetics), there are equally challenging design factors (such as package strength, permeability, and other physical factors that may compromise product integrity during shipment.

Opportunities to Leverage the Supply Chain from Design to Post Consumer Package management

High performing manufacturing companies are clearly using sustainable packaging design and manufacturing as a way to lever efficiencies through the product value chain. Companies are finding that using less complex packaging helps cut sourcing, energy production and distribution and fuel costs across the supply chain. The glory days of corrugated packaging as the one stop solution are being replaced with reusable packaging options. Also, reducing the consumption of raw materials, carbon emissions and waste generation reduces manufacturing costs.

Since disposal by consumers is one of the largest waste streams in thesupply chain, using less packaging ofdirect-to-consumer shipments also offers great opportunities for supply chain optimization. The previously mentioned Accenture report recommends that through route planning and sourcing software, “collaboration across the companies in the supply chain is necessary to maximize freight utilization. In particular, retailers need to proactively encourage vendors to provide pallet or “trailer feet” specifications for collecting shipments… retailer’s planners can determine the optimum transportation mode and look for multi-stop opportunities.”

Optimized Supply Chain (Accenture)

As shown in the accompanying diagram, Accenture suggests there are opportunities to reduce the packaging/un-packaging cycle by addressing the product life-cycle and optimized material use. Through ongoing recycling and the use of alternative materials throughout the product value chain, opportunities are created to reduce the volume of packaging waste. Also, take back programs create a two-way transportation flow, with reusable packaging materials being sent back up the supply chain rather than to a landfill.

Remember too that there are several key association and initiatives that can be tapped into, including:

This past weekend I went and finally did it. I closed the loop on my dream to play gritty, stripped down delta blues on a cigar box guitar (CBG) in tandem with my harmonica. At first I went to the local Recycled Arts Fair thinking I’d buy a four string CBG. But within a few minutes of speaking with local Vancouver, WA luthier Alan Matta at Hammered Frets (www.hammeredfrets.com), he’d convinced me to start with a 3 string and then think about a 4 (or more) string later. Why? Well, it’s simple. I don’t know how to play the darn thing! Fewer strings also means easier chords (with many requiring just one or two fingers), and more harmonic simplicity to help a newer player (like me) keep from getting overwhelmed. Plus, fewer strings means less tension on the neck and risk of bowing. (Sidebar: I do have a musical pedigree, having played brass instruments and harmonica since I was 12), and I get music theory, but playing stringed instruments…can an old dog learn a new trick?)

If you are a small to mid-sized manufacturer for instance, getting started with a company sustainability initiative, or in greening a supply chain is a lot like learning a musical instrument. Quite often if companies try to bite off more than they can chew (three vs. four string chords), there’s too much stress (like a guitar neck) and greater risk of failure (bowing of the neck). Simplicity often trumps complexity when getting started down the sustainability path. This is particularly true if companies are starting from scratch, or lack deep financial or personnel resources. So before companies start to feel overwhelmed, there are ways to “ease” into sustainability, without the stress.

Building a system to plan, implement, measure and check progress of the initiative.

Looking for the quick wins.

Building an innovation-based culture and reward positive outcomes.

Measuring, managing, reporting and building on the early wins.

Building the initiative in manageable chunks.

A Systems Framework to Get the Ball Rolling

Let’s accept for a moment that if you are reading this, you already understand that sustainability as a term means many things to many organizations. An effective sustainability roadmap and the systematic framework to manage sustainability must consider four key focal areas: compliance, operations, product sustainability and supply chain sustainability. Bearing in mind that “one size doesn’t fit all” there still needs to be a systematic way to get to the “desired goal”. A systematic framework like an ISO 14001-based Environmental Management System (EMS), offers a set of processes and tools for effective accomplishment of sustainability objectives. But in the event that a company isn’t quite ready to make the leap into the ISO world, there are alternatives.

A Cycle of Continual Improvement

“Plan- Do-Check-Act” Creates Shared, Sustainable Value

One such alternative comes from Organisation for Economic Co-operation and Development (OECD). The OECD has produced a “ Sustainable Manufacturing Toolkit”, that as they say “provides a practical starting point for businesses around the world to improve the efficiency of their production processes and products in a way to contribute to sustainable development and green growth.” The OECD addresses the four key sustainability focal points that I mentioned previously. As an aside, a collaborator with SEEDS Global Alliance (Sustainable Manufacturing Consulting) had a hand in contributing to this valuable project by providing detailed feedback on the toolkit.

According to the newly launched site, it offers two parts: a step-by-step Start-up Guide and a Web Portal where technical guidance on measurement and relevant links are provided. I tested out the site, and while parts appear to still be under construction, the information there is pretty intuitive and gives the novice some basic information that they can use to get started. For manufacturers in particular, the guidance offers 7 action steps to sustainable manufacturing:

Prepare [Plan]

1. Map your impact and set priorities: Bring together an internal “sustainability team” to set objectives, review your environmental impact and decide on priorities.

2. Select useful performance indicators: Identify indicators that are important for your business and what data should be collected to help drive continuous improvement.

Measure [Do]

3. Measure the inputs used in production: Identify how materials and components used into your production processes influence environmental performance.

4. Assess operations of your facility: Consider the impact and efficiency of the operations in your facility (e.g. energy intensity, greenhouse gas generation, emissions/discharges to air and water [ and land]).

5. Evaluate your products: Identify factors such as energy consumption in use, recyclability and use of hazardous substances that help determine how sustainable your end product is. (I’d also add water consumption and wastewater outputs). It’s here that the upstream supply chain becomes a very important consideration.

What more can a small to mid-sized manufacturing company ask for if they are seeking basic actionable steps for starting up the sustainability ladder. Remember folks, it’s better to start in small, incremental steps, with a scalable internal (risk and process driven) and external (supply network enabling) plan that provides “sustainable value”.

Implementing a sustainability program is best done in stages, like learning that cigar box guitar. No organization has the resources (or appetite) to tackle the “whole enchilada” at once. That’s why I’m keeping it simple and sticking with the three-string…for now.

“leverage agency acquisitions to foster markets for sustainable technologies and materials, products, and services. The head of each agency shall advance sustainable acquisition by ensuring that 95 percent of new contract actions, including task and delivery orders, for products and services, with the exception of acquisition of weapon systems, are energy-efficient (Energy Star or Federal Energy Management Program (FEMP)-designated), water-efficient, biobased, environmentally preferable (e.g., Electronic Product Environmental Assessment Tool (EPEAT)-registered), non-ozone depleting, contain recycled content, or are non-toxic or less toxic alternatives, where such products and services meet agency performance requirements.”

According to the GEP article, the effort was “spearheaded by the Defense Department, NASA and the General Services Administration, and part of the Obama administration’s campaign to lead by example in sustainable purchasing. The interim policy also requires all federal contractors to support the government’s goals in environmental management, and includes new requirements for electronic or other paper-saving methods for submitting documents required by contracts.”

95% of all applicable contracts will meet sustainability requirements;

Leverage Federal purchasing power to promote environmentally-responsible products and technologies to foster markets in these sectors.

Advance sustainable acquisition

This is a great development for the Federal government. Not only does EO 13514 drive new markets but requires government agencies to 1) define sustainable acquisition and 2) track sustainable contract actions and …get this…3) educate the acquisition workforce.

The GEP article notes that “the effects of President Obama’s Executive Order have been rippling through the federal government purchasing community for a while.” The article summarizes efforts by the U.S. Federal Trade Commission (FTC) which issued its Guides for the Use of Environmental Marketing Claims, Also the U.S. EPA is evaluating its role in evaluating products across their entire lifecycle, including “defining criteria for more sustainable products, generating eco-labels and standards and verifying products meet green standards “

The U.S. General Services Administration (GSA) has also initiated its GreenGov program, primarily focused on identifying products and practices designed to reduce the governments environmental (specifically carbon footprints). As I noted in an article this past winter, according to Council on Environmental Quality Chair Nancy Sutley, “The Federal Government purchases $500 billion in goods and services annually, so you could say the Federal supply chain represents an enormous opportunity to support a clean energy economy”. Participating companies will share their experiences to help GSA develop a phased, incentive-based approach to developing contracting advantages to companies that track and disclose their greenhouse gas emissions. This process appears to be glacial in its pace, compared to the light speed pace of technology development in countries like China.

As the GEP post noted, GSA is developing and evaluating green technologies and practices in several areas including: electronics stewardship, innovative building technologies and greening the supply chain. These latest activities by GSA are in addition to individual efforts that the Departments of Energy and Defense, NASA, USDA and Department of Agriculture have been implementing for many years.

On the surface this sounds all good, in fact, great. But there are some underlying systemic issues related to the timing of the FARC interim ruling, and industry groups and procurement agencies are scratching their heads.

Left Hand, Meet Right Hand.

In response to the FARC interim draft rule , several industry associations requested that the government , specifically the FARC to stop issuing rules that change federal procurement policy without first considering public comment.

Even though the “interim rule” is based on directives within executive orders (like EO 13514) from 2007 and 2009, the organizations (including members of the Council of Defense and Space Industry Associations, the U.S. Chamber of Commerce (no surprise), Professional Services Council and TechAmerica) came out and stated that increasing reliance on “interim rules” is a misuse of the “urgent and compelling” circumstances those rules are supposed to be issued under. The groups asked that the FARC withdraw the interim rule and republish it as a “proposed rule”, allowing for public comment.

The FARC maintains that the interim rule only mandates what previous executive orders, laws and sustainable programs have asked agencies to do and should not impact the agencies economically. But that may not be the case.

While many of the agencies that I mentioned above are well on the way to responding to the previously issued Executive Orders (and I applaud them for their efforts!), they appear to be doing this in different ways- which may inadvertently find some suppliers being able to respond to one agencies tender processes and not to another. It only took me a few moments to “Google” “government + green purchasing + requirements” to find remarkably outdated and variably detailed documents from Federal agency to Federal agency, some going as far back as the Year 2000! Even a report from the Congressional Research Service from April 2010 indicated that “The federal approach to green procurement is arguably largely piecemeal and fragmented.” Also, it would appear that agencies may still lack consensus on product “green” performance standards, which is clearly a part of the EO 13514 mandate

There is little in the way of specifics behind the statement that they must be “energy-efficient, water-efficient, bio-based or non-ozone depleting, and are certified as environmentally friendly, contain recycled content, or are nontoxic or less toxic than alternative products.” And it’s this lack of specificity and consistency among agencies that vexes small and large businesses alike.

“ there appears to be significant ambiguity about which type of green product or service agencies should procure in situations where multiple types could meet their needs. For example, the FAR requires agencies to acquire recovered-content products instead of biobased ones when both types would meet agency needs. However, no similar guidance exists for the other types of preferred products and services discussed in this report. That leaves agencies without guidance in determining whether, for example, they should procure Energy Star or FEMP-designated products, or recovered-content or environmentally preferable products.” Green Procurement: Overview and Issues for Congress, Congressional Research Service 7-5700, R41197 www.crs.gov

Why am I not surprised at the discontinuities that exist within Federal government (he asked rhetorically)? Even President Obama alluded these redundancies and inefficiencies in his January State of the Union address. According to a Government Accountability Office report released in January, the U.S. government has more than 100 programs dealing with surface transportation issues, 80 for economic development, 47 for job training, and 17 different grant programs for disaster preparedness, 15 agencies or offices handle food safety, and five agencies are working to ensure the federal government uses less gasoline. Really?! Inefficiencies are wasteful…plain and simple. This is no way to run a government let alone a business. And let’s face it, government is BIG business.

Training, Training, Training

What’s also concerning to me is that agencies may not have not adequately trained procurement staff that are prepared to implement detailed operational related to the “interim rule”. I also am concerned that federal acquisitions staff lack the technical training on green supply chain management to make informed choices beyond how to price and negotiate a contract. As a matter of fact the CRS report states that “…certain requirements, most notably those involving environmentally preferable products, may be difficult for the existing workforce to implement because agencies must consider multiple attributes of products when determining which product to purchase.”

According to Neal Couture, President of the National Contract Management Association (which represents public and private contracting officers), “Contracting people that I talk to have received very little training in the area of sustainability”. Additional cases in point, as described in a recent Federal Times article:

Leslie Deneault, program director for acquisition services at DAU, said there are optional courses available that cover the many legislative actions that affect acquisitions.

Professional Services Council executive vice president Alan Chvotkin said contractors and government officials may find it hard to get needed products and services that meet environmental standards, possibly due in part to other contract specifications that often limit local sourcing or small business participation.

Program managers who write the requirements will need to know to which environmental standards certain products and services should be held, according to Mr. Couture said.

And you think one interim rule is going to straighten the green purchasing issue out? There’s got to be a better way, and it may be found within the private sector.

One organization that is taking the initiative in responding to the interim rule on green purchasing and EO 13514 is the Clean Technology Trade Alliance, based in Bremerton, Washington. According to Mark Frost, the Executive Director of the organization, the CTTA provides the ultimate partnership between business and environmentalists by creating a market-based reason to become sustainable and operate with efficient, environmentally responsible products and services. In addition, the technologies and products associated with CTTA members fit nicely into the Federal government’s EO 13514 vision for sustainable and environmentally preferable products.

The CTTA mission is to drive the expansion of global clean technology by connecting buyers with sustainable solutions. One part of this mission that fits squarely into the Federal government procurement model and most recent FARC interim rule is identifying and verifying clean technology solution providers for business and government. Since it’s essential to validate the extent of sustainable practices of member businesses, the CTTA is getting ready to roll out an independent review process to validate clean tech solution providers. In doing so, the CTTA will reviewing each organizations operational processes and products and giving them a score based on defined criteria, using life cycle, product foot print, energy and multi-resource consumption and efficiency factors, etc. This review effort has the opportunity to become a market driver that moves companies to meet the highest “green and clean” technology standards in order to be more profitable and competitive. The CTTA also provides the means to discover clean technology solutions that will enable these companies to improve their score and profit from their efforts.

In addition the CTTA assists its members in 1) making commercialization of products easier with a trained sales force, that provide members qualified leads, and facilitating distribution lines for both established and unseasoned products; and 2) developing synergies between businesses that create new technologies, open new markets and discover new efficiencies. Those who collaborate with the CTTA receive a single point of contact to find clean technology business solutions, and most importantly a market reference point for making clean technology purchasing decisions.

The CTTA is uniquely positioned to provide the Federal government with a single, unbiased, point of entry for identifying and vetting clean technology solutions. First the basic identification and reporting service is a no cost service. Second if the CTTA does not have a member, or several members, that can provide the solution they will conduct a search to identify potential solution providers and conduct a basic survey to provide an initial vetting for the requestor. Third if the solution exists they will find a provider, if it does not they can work with companies to develop the solution if there is a sustainable market. The CTTA is a membership-driven organization, recruiting new members and servicing existing members- this is how the CTTA grows. Mr. Frost states that providing services to customers like GSA, the DoD, NASA, Boeing and others allows the CTTA to recruit small and mid-sized business members and is another example of the business synergy the CTTA pursues.

What Can Be Done to Harmonize Green Procurement?

The CRS report raised many of the questions about the efficacy of legislative initiatives or federal rulings that came to my mind in the months since I participated in a GSA GreenGov Summit in Portland, so I figured I’d just repeat just a few of them here:

What, if any, are the most useful and appropriate policy goals for green procurement?

Are the means by which different green-procurement preferences, programs, and other initiatives have been established the most appropriate for meeting policy goals?

How effectively are agency implementation and performance of green procurement being assessed?

How successful are current programs and initiatives at meeting policy goals?

Are policies on the acquisition of green services sufficient?

Are the preferences and the methods of implementing them sufficiently harmonized and integrated?

Are there significant gaps in the various federal preferences for types of green products and services?

Are there implementation methods not currently used by the federal government that should be considered?

Is training of procurement officials sufficient?

Until these questions are fully explored, I suggest the Federal government hold off on finalizing its interim rule and consider the collaborative private sector example being implemented by the CTTA. In a perfect scenario, the White House should instruct representatives from the GSA, OMB, DoD, DoE, USDA, EPA, and Agriculture (and others) to come together in one place, at one time. Attendees should also be invited from the private sector too- the best brains in the science, engineering and design of clean technology, standards development, policy, manufacturing and procurement/material acquisition.

In systematic and structured manner, they can hammer out a viable, results driven framework for sustainable sourcing and procurement. This in turn (I am sure), will promote new technologies and drive the creation of new “green economy” markets….without all the confusion and lack of harmony.